When considering the running of a corporation, there is a principal-agent problem between shareholders and the CEO because
A. shareholders cannot observe all of the CEO's decisions.
B. shareholders require the firm to pay a dividend.
C. shareholders sign confidentiality agreements.
D. the CEO is paid in part with stock options.
E. shareholders want the firm to maximize the firm's share price while the CEO wants to maximize profits.
Answer: A
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One way of reducing the moral hazard problem in the automobile insurance market is for drivers to
A) carry high deductibles. B) carry no deductibles. C) all have good driving records. D) never make any claims.
One example of human capital is the amount of skills that you have
Indicate whether the statement is true or false
If the asset market is to remain in equilibrium, then if the money supply increases, output is unchanged, the price level is unchanged, and the expected inflation rate is unchanged, then
A) the real interest rate must rise. B) the real interest rate must decline. C) the nominal interest rate must rise. D) the inflation rate must rise.
The underground economy includes
A. babysitters paid in cash. B. landscapers. C. self-employed workers. D. babysitters on a payroll.